Singapore LNG Stakes Claim for Second Terminal: Southeast Asia

Singapore LNG Corp. is touting its
experience running Southeast Asia’s biggest liquefied natural
gas receiving terminal as a sign it can manage a second facility
planned for the city-state.

John Ng, the company’s chief executive, says he’s up for
the challenge when the government starts looking for an
operator. While Singapore hasn’t said when the second terminal
will start, industry consultants including FGE forecast it will
be after 2020.

“We are always ready,” Ng said in an interview at his
office on March 20. “Do we have the capability to build, design
and operate the terminal? The answer is yes.”

As Asia overtakes Europe as the world’s biggest natural-gas
importer, Singapore wants to tap burgeoning demand for cargoes
and cement its place as the region’s LNG trading hub. The
country, which uses gas for more than 90 percent of its
electricity, is studying locations on the east of the island for
a second terminal to support industries and fuel power stations,
Prime Minister Lee Hsien Loong said last month.

“The SLNG team will probably be the operator because they
will be more experienced and the government will be comfortable
replicating the same model,” said Tony Regan, a Singapore-based
energy consultant at Tri-Zen International Inc. He expects the
terminal to start operations after 2020.

Asia accounts for 46 percent of global gas trade, according
to the International Energy Agency, which identifies Singapore
as best-placed to be a center for LNG trading. The region
consumed 75 percent of the world’s LNG last year, data from the
International Group of Liquefied Natural Gas Importers show.

Japan Demand

Singapore’s second terminal will have a capacity similar to
the first, according to the Energy Market Authority, the
regulator that oversees the country’s energy industry. The
existing facility has three tanks that can handle 6 million
metric tons a year. A fourth will be added by 2017, increasing
capacity to 9 million tons.

The site can accommodate as many as seven tanks that could
process 15 million tons annually, Lee said at the official
opening last month. Japan, the world’s biggest importer,
consumed about 87.5 million tons in 2013.

Sharon Tan, a spokeswoman for the EMA, said the regulator
doesn’t have information yet about the process it will use to
identify and select an operator.

Singapore has the only LNG terminal in Asia that can reload
cargoes from storage, allowing traders to store gas during low-consumption periods before selling them during peak demand
seasons in winter and summer. SLNG may make the third tank
available for traders to carry out short-term transactions, Ng
said.

Singapore Traders

Germany’s E.ON SE and Glencore Xstrata Plc (GLEN) are among
companies that have hired LNG traders in the city as the market
grows. Qatar Liquefied Gas Co., the world’s largest producer, is
looking to expand in the region, Abdulla Al-Hussaini, the
company’s marketing director, said in an October interview.

More terminals in the region will help boost trade volumes
and establish more competitive and responsive LNG prices,
according to Ng. About 27 percent of LNG supplies, or 65 million
tons, are traded on a short-term and spot basis, according to
the International Group of Liquefied Natural Gas Importers. The
rest is bought and sold in long-term supply contracts with
prices typically linked to the cost of crude oil.

LNG to be shipped over the next four to eight weeks to
North Asia dropped to $15.80 per million British thermal units
in the week ended March 24, down 20 percent from a record $19.70
on Feb. 3, according to New York-based Energy Intelligence.

Floating Terminal

The Energy Market Authority is studying whether to build
the plant offshore on a floating facility, its CEO Chee Hong Tat
said Feb. 26. SLNG, owned by the Singapore government, was
formed in June 2009 by the EMA to operate the S$1.7 billion
($1.3 billion) first terminal on Jurong Island, which began
commercial operations in May last year.

“I’m quite confident we have the capability to do the
second terminal as a floating one,” said Ng, who became chief
executive on Jan. 1, taking over from Neil McGregor. “The
challenges are no less or no more than a land-based one.”

A floating storage and regasification unit, or FSRU, may be
a better choice for Singapore’s eastern terminal as technology
improves, according to Regan. FSRUs typically consist of LNG
vessels anchored offshore to receive and store shipments before
the supercooled gas is sent into an onshore pipeline system.

“FSRUs are cheap, quick to build and start, you can put in
a second unit five years later to increase capacity and it gives
Singapore, which is a small country, a lot more options where to
place the second terminal,” said Regan.